Commentary: Controversial Joe Granville says Dow could rise 800 points
NEW YORK (MarketWatch) -- The good news: a long-time bear has turned bullish. The bad news: it's Joe Granville.
Unfair! Some readers get angry whenever I mention Granville, veteran editor of The Granville Letter. They remember his clownish behavior in the early 1980s, when he had a hot hand and was the most famous letter writer in the world, and also the subsequent disastrous performance of some of his portfolios, among the worst for which the Hulbert Financial Digest has a record.
But that was then, and this is now.
Granville has retrenched, abandoning systematic stock advice, so that the HFD now follows only his market-timing advice. And that's been quietly successful for some time.
Over the past 12 months, Granville is up 3.3% by Hulbert Financial Digest count, vs. negative 11.8% for the dividend-reinvested Dow Jones Wilshire 5000. Over the past three years, the letter has achieved a 4.2% annualized gain, vs. 3.3% annualized for the total return DJ-Wilshire 5000. It's slightly under water over five years, but over the past 10 years, the letter has achieved an 5.6% annualized gain, vs. 3.7% annualized for the total return DJW.
But note carefully: when HFD tracks Granville's timing by going short whenever he's bearish, as opposed to going to cash, he still loses money.
When I last checked in, almost a year ago, Granville was in a face-off with his fellow-octogenarian and veteran letter writer, Richard Russell, whose reputation, unlike Granville's, had continued to grow and was then at its height.
Granville was bearish, Russell was bullish. Granville was right, Russell was wrong. See Aug. 3, 2007, column
Granville has a poignant lead in his letter that just snailed in (Granville's stubborn low-techiness is another contrast to the Internet-savvy Russell): "A few days ago a man called me and was concerned because I had forecast a move in the Dow to 9,000 and the market was rising. I reminded him I had turned bullish on July 15th. He didn't know that because he had apparently let his subscription lapse. Once a call has changed from bearish to bullish, it then invalidates all projections made when I was bearish. When I get a sell signal, then all my earlier projections will be back in force."
Granville then asks: "Why am I currently bullish? Because I follow the market. The market on July 15 demanded that all market followers turn bullish. We had 1,304 new stock lows. That was the highest number of new lows in market history. That alone demanded that all shorts, with the exception of the oils be covered. But on that day we also saw a CLX downside non-confirmation, the Dow falling on a rising CLX."
The CLX or "Climax Indicator" is one of the many price patterns on which Granville, as a purist technician, absolutely depends. He defines it as "the net number of On-Balance Volume up and down designations." "On-Balance volume", invented by Granville more than 40 years ago, adds a period's volume when the close is up and subtracts it when it is down.
Granville's third signal: Sentiment: "At the start of all important advances or declines there is always disbelief."
Granville's current projection: "How far could this rally carry? My first guess could take it up 800 points, but my most recent research is taking aim at the 12,000 Dow area. I had said to do some buying in the airlines, banks, brokers, and casinos, but keep shorting the oils.
"This past week oil broke key supports and now looks headed for the $121 level. Only a few days ago, The Wall Street Journal said the consensus was looking for $200 a barrel, typically wrongly timed. I think anything under $121 projects to $100."
On Wednesday, September crude closed at $118.58 a barrel 
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